Inflation at a 10-year low

By Kurt Brouwer

There is good news and bad news on the inflation front. The good news is that inflation is very low and going lower. The bad news is (you guessed it) that inflation is low and going lower.

In fact, the Federal Reserve is doing everything in its power to get the economy pumping again and it would dearly love to see inflation ramping up because that would be a sign that the economy is growing.

This chart shows how low inflation is now compared to inflation in the past. The chart documents 10-year average rates of inflation.

The red line shows that the total inflation (as shown by the Consumer Price Index or CPI) over the past 10 years has been 25.97%. That 10-year total is lower than any 10-year total for the past several decades. So, the purchasing power of your money is holding up much better than it has since the 1960s.

Now, I have issues with how well the CPI tracks inflation. There were times in the past when it understated inflation in my view. Now, if anything it may be overstating it. Nonetheless, the trend is clear. There are few inflationary forces at work now–other than the Fed that is.

About Fundmastery Blog

Kurt Brouwer is a fee-only financial advisor with three decades of experience. He is the chairman and co-founder of Brouwer & Janachowski, LLC. Kurt has written books, articles and hundreds of blog posts on mutual funds, ETFs and other investment topics. E-mail: kurt.brouwer *at* gmail.com.